A new gizmo is upping the odds that even the most hard-knock customer
will come up with the car payment. Hooked into the ignition system, the gadget comes in a
handful of versions with one common conclusion:

No pay, no start.

Its worked wonders at Norfolks Patriot Auto Sales, where
nearly every car that drives off the lot is outfitted with a PayTeck
Smart Box, a system that hands over a five -digit code in exchange for each payment. Come
due date, the car wont crank until the customer punches the code into a palm-size
keypad wired into the dash.

Located on Military Highway, Patriot is the kind of operation that
specializes in steeper interest, high-risk car loans. It advertises no
turndowns a corner of the used car business that deals with a
credit-challenged clientele, as the industry puts it.

Bad credit? said Art Madden, Patriots general
manager. Id be happy if they just had bad credit.

Not surprisingly, default rates are high. Its not unusual for more
than a third of the cars sold off such lots to wind up being repossessed. Since Patriot
began using PayTeck three years ago, its repos have dropped
from about 45 percent to less than 15 percent. Madden figures he has close to 500 of the
$200 units on the road  an investment that has not only cut repos but boosted
business.

Without it, we could never make a lot of the sales we do,
Madden said, not if we wanted to keep our doors open.

Buyers sign forms acknowledging the Smart Box, agreeing not to tamper
with it and promising to return to the dealership for a free removal after the last
payment is made.

Payments are due every two weeks at Patriot. Sales staff program the
first due date into the Smart Box, and the system keeps track from there. As time runs
out, tiny lights on the keypad shift from green to red, and a chirping noise provides an
audible nudge. Codes, once keyed in, reset the box for another two weeks. There is a
four-day grace period. After that, the unit kicks in and voila: n o vroom.

Its amazing how people manage to pay when they know their
car wont start, Madden said.

Some consumer watchdogs dont approve, though no complaints have
been filed on Virginias consumer hot line.

I think its the level of control that bothers me, said
Ken McEldowney, executive director of Consumer Action, a national non profit group based
in San Francisco. It just sounds like Big Brother run amok. Theres got to be a
more respectful, less intrusive way of doing this that isnt so demeaning.

The systems will not cut off a running motor, but McEldowney still
worries about safety.

What if a young mother with children gets stranded in a dangerous
part of town? he asked. Or someone needs to go to the hospital?

But no-start systems have held up in court. In 1999, a handful of
customers filed a lawsuit against Mel Farr, an NFL Hall of Famer who became a car dealer
in Detroit. The buyers felt the devices posed a danger and wanted them removed. A judge,
however, sided with Farr.

To minimize risks, though, Patriot times its no-start systems to switch
on at 4 a.m., when cars are more likely to be parked at home. In the case of an emergency,
special codes can be used to override the system for one 24-hour period.

And, Madden said, we work with people, if they seem to be making
an honest effort. But if we dont hear nothing from them or the same relative dies
for the third or fourth time, bam, guess what? Youre going nowhere.

Customers say the systems can be embarrassing, even for those who pay.
For discretion, key pads often are tucked inside the glove box, but the chirping can be
hard to miss. Some systems sound off every 30 seconds when the deadline draws near 
a racket a passenger, or new date, is sure to notice.

Yeah, that parts not too good, said Calvin Flowers, a
former customer-turned-salesman at Patriot. Two years ago, after a divorce, Flowers said,
his credit was in shreds. He needed a car, but few dealers were willing to take a chance
on him. He drove out of Patriot in a 1997 Chrysler LHS, armed with a Smart Box.

It was a better car than Id have been able to get without
it, Flowers said. Making prompt payments, he said, also helped him repair his
credit.

Mike Simon is president of Payment Protection Systems, one of the early
pioneers and now among the largest producers of devices that move the car payment
from the lowest priority to among the highest, Simon said.

Based in Temecula, Calif., the company initially dealt in automobile
anti-theft technology. But at a car convention in the mid-1990s, a dealer commented to
Simon that while security is a fine thing, what he really needed was a way to make
customers honor their loans. The company started marketing its On Time system in 1999,
selling more than 200,000 units at last count. Of late, theyve shipped to England,
Mexico and South America.

The need is the same everywhere, Simon said. Most
people want to pay, but its not hard for them to get into financial trouble.

No-start technology is so effective, Simon said, its being put to
use in other industries. Rental TVs, appliances, printers, medical equipment such as MRI
and X-ray machines  anything thats electronic and financed, Simon
said, we can shut it off.

At Patriot, Madden says hes in the process of switching to a new
Internet-based system that doesnt use codes. The system requires fewer staff to
manage and will allow him to pick the moment when a car carrying one of his loans
wont start. With one phone call, he can shut down a driver anywhere in the country
for non payment.

Its all the difference for us, Madden said. We
dont really like it, but it sure works.

PRESS RELEASE 11/14/2005

SOURCE: Pay Technologies LLC

In a move that promises to expand its products throughout the
Latin American market, PayTeck appoints Miami, FL. based Trademax Intl Inc. and its
affiliate AUTOSTOP S.A. based in Quito, Ecuador, as its Exclusive Distributor for Pay
Technologies LLC innovative credit solutions products in Ecuador. This is just the first
move of PayTecks expansion into the Latin American markets. Trademax Intl Inc.
also plans to expand with Payteck products into Colombia, Peru, and Venezuela, starting
early next year and beyond into other countries in the region based on the success of
these early ventures.

Pay Technologies LLC President, James H. Krueger said, "We are very
pleased to have Santiago Pareja, Trademax Intl Inc. President, representing our
automotive credit solution products in these countries. Santiago brings vast experience
and credibility to this exciting new venture." Santiago Pareja is a life long
resident of Ecuador and has excellent knowledge about all local trade practices and
procedures. Mr. Pareja was educated in the United States and attended the University of
Florida, graduating from Florida International University in Miami.

About: Pay Technologies LLC

Pay Technologies LLC designs and builds innovative Starter Interrupt
Systems for the automotive dealers and automotive finance industry. The PayTeck code
system has for many years proven to provide a reliable, dependable system to make sure
your customers make payments when required. The PayTeck controls are designed to encourage
timely payments. Programming of the controls is laid out in an easy-to-read owner's manual
to explain and operate the PayTeck controls. When the customer makes a payment, the dealer
gives the customer a new code. Dealers claim that late payments drop to around 5 percent
from more than 30 percent. This results in a positive cash flow for use in the business.
Staff needed for collection is reduced, and dealers can now sell deeper, resulting in
increased sales. Dealers point out that the PayTeck consumer benefits make for a smooth
transition to a successful close. PayTeck has hundreds of dealers all over North America
using the PayTeck controls and now in South America

The idea of making a better profit by doing your own financing
probably occurs to most dealers at one time or another. We know the money that interest
can pile up because too often weve had to pay it as business folks or as consumers.
It would be nice to be on the other end of the deal for a change. The other end of the
deal may be putting together a Buy Here, Pay Here operation and financing
sales yourself.
Lets say that Dexters Deals which doesnt finance, buys a
$5,000 car at auction and sells it for $6,000 in cash, Dexter pockets $1,000, and then
goes back to the auction for another car to check out, buy, transport and show. If
Pappys YaAll Pays Here sold the same car but handled the financing, it would look
like this:
$6,000 x 15% x 3 years = $2,700 in interest + the $1,000 profit = $3,700
It is almost like Pappys sold four cars to Dexters one. Not very surprising
that BHPH is an up and coming industry within the auto-remarketing world. Sure, it will
take Pappys three years to see all of that cash, but Pappys will see it:
provided the customer pays; and that, is where and when the golden goose of Buy
Here, Pay Here has all too often in the past, laid a goose egg.
Many dealers shy away from financing because they know that a Buy Here,
Pay Here can turn into a Buy Here, Pay if You Feel Like It operation,
and the dealer is stuck hiring collectors and doing repos. Most into BHPH know
theres no can turn into about it: thats what happens. If selling
cars is hard work, financing them has the potential to be a nightmare: running after
customers all over town or the state to get payments that are months late, and when you
find them, theyre often mad because you want paid. There will always be customers
that dont pay their debts; that is a simple fact of human nature, but there is a way
to keep most customers paying on time, even if they are bad credit risks. That way, is
using starter interrupt devices.
The starter interrupt concept is easy to understand and youve heard it
before: if a customer doesnt make a payment by the Friday its due, the car
wont start on Saturday morning. None of that, The checks in the
mail, or Youll have it Monday, its No Dough, No Go: Simple
as pie. For a buyer who doesnt pay their car payment, it turns into something like
taking your laundry to the laundromat; if you want anything to happen, youd better
put money in the machine or its just going to sit there. If a consumer doesnt
pay the telephone bill, it gets shut off; if they dont pay the electric bill, it
gets shut off, there is no reason why cars shouldnt work the same way. A starter
interrupt (SI) also moves a consumers car payments to a number one priority item.
Maybe the buyer can put off the cable company another month because the cable company
doesnt want to send one service truck to disconnect this week and another one two
weeks from now to reconnect when the bill gets paid. For SI systems, its a couple of
buttons to push and thats it, game over. So why doesnt every financier have
SIs on the vehicles for which hold they liens?
Financiers/sellers have had concerns about putting out vehicles equipped with
starter interrupts since they first appeared on the market. A primary fear is that the
device will shut the car off in the middle of an intersection. Since they are
starter interrupts, they only prevent starting the car and do not shut off a
vehicle that is in motion or running. You can string the mental dominoes together to make
a nasty situation if you put your mind to it. For instance, a buyer fails to make a
payment, keeps the car running past the deadline (for some companies 4:00 a.m. on Saturday
morning,) and then stalls it in the middle of an intersection and it doesnt start.
He gets run over by a steamroller. That situation is a whole lot less likely than one of
your buyers running out of gas or having a mechanical breakdown. Some SI companies have
systems which come with emergency codes to allow one or two starts for emergencies, and
one system allows a special code which gives the consumer 24 hours of use in emergencies.
So can a buyer sue you for the car not working? Only one case of consequence
was filed so far when in late1999 suit was brought involving Mel Farrs dealership in
Detroit. If the name sounds familiar, Farr is the former Detroit Lion running back. Farr
was doing business as a new car dealer and later set up a financing program complete with
SIs for people that had bad credit in the inner city. Some customers filed a suit claiming
that the devices were dangerous and improperly installed. The judge agreed with Farr, that
they were safe and gave the dealership a favorable settlement, then made what sounds like
an obiter dictum (statement after the judgment over and above by a judge) on Farrs
operation, In this lawsuit the Mel Farr Automotive Group has demonstrated that it is
sincerely and keenly interested in the future of our region. The public can be satisfied
that Mel Farr Automotive Group has in place a program to provide the consumers with safe
On Time devices. The judge may not have said that Farrs was a
precedent setting case, but folks in the business cite it as one. While you can be sued
for anything, dealers rarely get into litigation over these devices. To avoid any
problems, dealerships should include complete information, arbitration clauses in their
agreements, and make sure that devices are installed properly. Perhaps the best news for
SIs is that people are starting to accept them as part of the culture.
As a dealer, Id first be concerned about the time to put it on and the
time to take it off: as in, how long do I, the overworked dealer, need to spend putting an
SI on a car and how fast can an ornery customer take one off? One company claims that
their SI will go on in two minutes for cars 2000 & later, for earlier models they say
the installation is about ten minutes. How long would it take for a customer to take one
off? About the same, depending on their mechanical skills. If that is a concern, one
company makes their SI tamper-proof. It takes a little longer to put on and takes a lot
longer to get off. This concern may not be that important as one study of about 50,000
devices showed that only .06% (about 1 in 2000) customers bypassed the unit.
A second concern might be, What happens if they still dont pay
when the car stops working? At that point, with some SI models you are back to the
collector and repo
ballpark, hunting down the buyer and the vehicle. Some SI companies assist with that part
by having GPS devices as part of their SI. Those are basically GPS systems with
cellular technology for computers to call into the GPS/SI unit in the vehicle. For the
subsequent repo, there will be very little hunting, the GPS unit tracks the vehicles
location every six seconds. Since the U.S. Government removed the error factor that they
had purposely installed, you can find the vehicles location within a
yardsticks length. Another company offers an GPS/SI system that will set off the
horn so your blind repo man will find it from that one yard away. The drawbacks of the GPS
system are the cost of the GPS unit and the cellular calls. Some packages come with a
certain number of hit (calls to the unit) per year. If you have a weekly pay program, the
basic 24 calls per year package isnt going to do it. You already have probably 52
calls a year and if you make a mistake, you could accidentally set it to call several
times a day. You wont know about the error until just before you faint from seeing
your next cellular bill from the system. As with cellular phones, there is not cellular
service in all areas and depending on the company, there may not be towers where you need
them for certain customers.
For the consumer, one company offers at a low price, a security system where a
three digit code number is needed to start the vehicle. This serves as a theft deterrent
and may allow the consumer to get a lower insurance rate. One dealer states that many
consumers like SIs and dealers often sell them to the consumer when the final payment is
made.
What kind of price are we talking here? That depends on the type of system.
First there are the time devices, called passive, even if they are not quite passive. In
these systems, the device is set to require a code for every pay period. When the customer
enters the code, the SI lets the car start for the next two weeks or month, whatever
payment plan you have set up for them. If no new code is plugged into the device, the SI
kicks in and the car wont start. The customer then has to call the dealership and
pay up to get a new access code. Passive systems run roughly from $100-200 a unit. When a
car is paid off, you take out the SI and put it into another car.
The second type of unit is the pager device. This kind uses pager-like devices
in the SI box to turn on the SI and keep the car from starting. You pay for the unit and
then so much for a plan to cover for instance, a four-year pay plan. The plans
range from $25 for four years to $45 per year and allow you so many hits or calls to the
pager per year. While it looks like a simple cost item, you need to look at the TLC- which
in this case stands for Total Life Cost. When inquiring about an SI model, you want to
find out how much you will pay for the unit, service fee, and the average number of hits
you need to make for a customer over the life of the loan. And, you have to look at the
coverage area. With a pager system, when the kill signal is sent out, there is no
confirmation that it was received, other than the customer calling or showing up with
money in hand.
Companies usually have coverage maps and some will show you where their
signals are so strong that they can send signals to SI units even if the car is inside a
building, and where it is only strong enough to reach cars out in the open. The maps also
show where there is no coverage. Lower rates can mean they have less towers and your
entire customer area may not be covered. GPS systems were already mentioned, and their
price range is from about $250 and up. That rate probably will not change since the system
requires both cellular and satellite technology so there are a lot of go-betweens with
their hands out. While GPS is the only system to pin down the vehicles location, the
other two systems tend to limit where the vehicle can be. Generally customers go home at
night, and if they parked it on the street, street cleaning happens often enough that you
will probably find the car in the police impound lot within the month.
Is every vehicle that goes out with an SI paid for? No, it cuts down on the
number of repos and some systems can make repos easier, but it does not eliminate
no-pays
completely. Dealers who use SIs say that payment problems go from 30% of their accounts
down to about 5% of their accounts. PayTechs WebTeckPlus® claims its down to
a 2.4% default rate. Thats most of your bad BHPH customers becoming good BHPH
customers. Putting an SI on the
golden goose may just make it start laying those golden eggs again the way you planned
from the beginning. ?
*Just before press time I had the opportunity to speak with Ray Lyle II of Nice Cars in
Tennessee. Ray and his father have been using starter interrupts for several years now and
they sell about 6,000 cars a year. They dont send out a vehicle without one. Ray
gave me some interesting details about problems with starter interrupts. One of the
problems is with customer understanding. Since having an SI on a customer's car makes his
car different, if anything goes wrong with the car, the customer figures that
it must be the SI. That is rarely the case, the SI problem rate is very
lowtheyve had about 5-10 problems out of 18,000 cars and those were mostly
because of improper installation which they outsource because of the volume of business
that they do. It takes the technician about 20 minutes start to finish to put the device
on the car. If a car doesnt start, a tech can check out the SI device in a couple of
minutes without any special equipment.
*More information on SIs can be found on the PIADA Dealer News page at www.piada.org

NEW YORK (CNN/Money) - If you don't pay the electric
bill, the electric company shuts off the power. If you don't pay your phone bill, your
phone stops working. Now people with weak credit histories can have one more thing that
stops working when they miss a payment. Their cars.

Starter-interrupt devices, which allow auto financiers
to remotely disable cars, are starting to grow in popularity among smaller car dealerships
and financing companies who cater mostly to customers with poor credit. A handful of
companies manufacture variations of the device, which dealers install on automobiles in
order to enforce payment plans.

"What we've done is effectively moved car payments
in priority up near gas and phone payments," said Mike Simon, CEO of Payment
Protection Systems.

The company, based in Temecula, Calif., manufacturers
the On Time system, in which a microchip in the vehicle carries payment-plan data and
keeps the car buyer schedule honest with a small red light on the dashboard that blinks
when it's time to pay up.

Most starter-interrupt systems also feature a small
keypad. When customers miss a payment and their car is shut off, they must contact the
dealer and make their payment. They then enter a code supplied by the dealer or financier
to start the car. Some systems, like Pay Technologies' PayTeck,
require car owners to enter a code after making each scheduled payment.

Payment Protection Systems is growing at a rate of more
than 40 percent, said Simon, with a roster of 350 clients. Stan Schwarz said his
Denver-based PassTime's client list is now in the thousands.

The start of starter-interrupt

Starter-interrupt systems began appearing slowly on
smaller car lots in the late 1990s, mostly at so-called "buy-here, pay-here"
dealerships. Such dealerships, which finance the cars they sell, often attract buyers with
poor credit history.

The technology was met with serious skepticism at first,
stemming from both privacy issues -- some starter-interrupt devices, such as those made by
Aircept of Irvine, Calf., have global positioning technology that allows dealers to find
out where a car is located -- and possible liability suits.

Farr, who operates Triple M Finance near Detroit, said
he still uses the On Time device and has sold between 4,000 and 5,000 cars with the device
on them.

"Some (buyers) had concern initially, but we'd give
them an explanation and went through the mechanics of it with them," Farr said.
"This device is connected only to the starter; there's no way it will stop the
car."

Gary Burton, general manager of Key Life Cars in Dalton,
Ga., outfits all the cars on his lot with the PayTeck system.

"I love it," he said. "People are
actually making their payments."

A Long Road for Ignition Switches

Auto Remarketing, February 1, 2003

Paul Hobson, News Editor

For years, starter-interrupt devices have struggled to escape the shadow
of bad press, but with a few success stories leaking out and some court decisions favoring
the industry, dealers have taken notice.

The buy-here, pay-here industry has slowly started using
starter-interrupt devices, also called starter kill switches, since they seem to cut
customer delinquencies and repossessions.

"What that does is make (a customer's) their car payment their No.
1 priority," said Stan Schwartz, of Passtime, one of the industry's top
starter-interrupt sellers.

Used primarily in the high-stakes business of buy-here, pay-here sales,
the devices give dealers a remote way to immobilize cars when their drivers don't make
payments. Dealers can send a signal to a kill-switch, and the next time the customer tries
to start the car, it won't turn over.

Then the customer has to call the dealership and in order to start the
car.

"Instead of you chasing them, they're chasing you," Schwartz
said. "It eliminates the guesswork with customers, but it also gets you talking with
your customers."

Most starter-interrupt systems require a customer to call and get a code
from the dealership after each payment is made. That code will activate the car until the
next payment is due.

Some systems like PayTeck include a
computer, no larger than a deck of cards, installed in the car to store the customer's
account information. The customer can check on the computer when the next payment is due,
and like other systems, the customer gets a new activation code after each successful
payment.

A customer who knows a car will be shut off if a payment is missed will
often make an extra effort to gather the money or at least call the dealership and discuss
the problem, Schwartz said.

"What he realizes is, 'Everybody I owe money to I can still put off
for 30 or 60 days. However, if I'm late on my car payment for one day, I don't
drive,'" he said.

What sellers and users most like to point out is how the devices save
dealers money, said Brian Hoppel, vice president of operations for Auto Master Systems, a
software company for self-financing dealers.

"It helps the bottom line," he said.

According to PayTeck, a starter-interrupt
system can help self-financing dealers reduce collection staffing while improving results,
cut default rates and improve profitability.

Of course, many dealers question whether they can convince their
customers the devices will help them, and some wonder if they will hurt sales. To answer,
some of the industry's top sellers have several selling points to suggest.

First, the devices can help customers rebuilt their credit. Most people
who choose buy-here, pay-here dealers have damaged credit, and each successful payment
comes with a valid dealer credit receipt, according to PayTeck.

Those credits make it possible to eventually trade up to newer cars at
lower interest rates.

Some starter-interrupt devices come with anti-theft systems, helping the
customer protect the car, Schwartz said. PayTeck offers a
security system at a small cost. The system comes with an electronic keypad that acts as a
visual theft deterrent.

With the final payment on a car, the customer can buy the security
system or have in removed.

The security systems also help customers lower their insurance premiums
since many states offer discounts for them.

For customers concerned with safety, dealers should know the details
about how and when their devices shut down cars. For instance, PayTeck
freezes cars at 4 a.m., a time drivers are not likely to be on the road.

And of course, the devices don't stop cars in motion.

Past Struggles

The development of starter-interrupt devices dates back to the
mid-1990s. The first generation was sold in 1997, and Passtime introduced their model at a
dealer convention in 1999, Schwartz said.

Some dealers immediately bought them, but others were wary and chose to
wait and see how the industry - and especially retail customers - responded to them. Soon,
though, more companies started selling starter-interrupt systems, and they gained
popularity.

In fact, Passtime added global positioning satellite technology to its
services in 2001. It used the system to track customers for repossessions.

One potential setback for the devices was a 2000 lawsuit against a
subprime dealer, although the case was eventually settled in the dealer's favor. In that
case, Mel Farr, a new-car dealer in Detroit who set up a side business to finance cars for
inner-city drivers with bad credit.

Some of Farr's customers complained in a lawsuit that the device was
dangerous to drivers and passengers because it was either defective or installed
improperly. Farr countered that the devices were safe, and the court agreed.

For the buy-here, pay-here industry this ruling sets the precedent for
dealers who wanted to use starter kill-switches without worrying about legal
repercussions.

Since that suit was concluded, the starter-interrupt business has slowly
emerged from the shadow of bad press and buzz phrases like invasion of privacy.

"The customers are accepting them now," Hoppel said. "At
first it was like a hard sell."

Similar Devices

Some companies have used GPS devices like starter-interrupt devices.
They send signals to the device in order to freeze the ignition when a customer misses a
payment.

Since those devices are cellular, they might not work in all areas,
Schwartz cautioned, and they can be expensive.

Other GPS devices are used solely for tracking cars should a
repossession be needed. That's the approach Future Carz takes with its vehicles, attaching
devices that update a vehicle's location every six seconds.

That technology has been used by fleet owners and trucking companies
with a lot of vehicles to manage, and dealers are now seeing benefits in using GPS
devices, Future Carz stated in a release.

Schwartz said GPS systems could be costly because they had to be removed
when the vehicle was paid off. Also, the technology is so new that there are no legal
cases dealing with its potential privacy issues.

Cellular technology can also be used to track and disable cars. If a
customer doesn't pay on time, the dealer can send an electronic signal to the car and
activate the starter-interrupt device.

However, cellular service doesn't work in all areas, so the signal might
not always go through.

Starter-interrupt devices are slowly gaining acceptance and will truly
arrive when finance companies start using them, Hoppel said. Most consider them too
cumbersome for auto portfolios that include thousands of vehicles, but that attitude could
change as the systems develop.

Auto Sales Give Dealer Way to Grow Finance Business

USED CAR NEWS 10/07/2002

By Jim Stickford

LAUREL, Del.  While buy-here, pay-here dealers lend money to sell
cars, Greg Johnson sells cars to loan cash.
Johnson, 46, is the co-owner of The Car Store, a buy-here, pay-here dealership that
carries slightly more upscale inventory than most of his competitors.
But owning a used-car dealership was not something he always dreamed of doing.
Im not a car guy, Johnson said. I am not a mechanical person in
any way. I worked in insurance for all of my adult life and was an equal partner in an
agency that has three locations and 27 employees. I sold my interest in early 2001.
Johnson decided to look for a new challenge. In addition to his insurance business, he is
also part owner of a business called Cash Advance Plus. The company specializes in making
small, unsecured personal loans, often called payday loans.
This enterprise led him to start his own dealership. He, along with dealership partner
Edward Wilgus, wanted to get into the retail end of the business to better control the
application information used to make decisions on car loans.
We thought we could sell a little better car in a more traditional financial manner
that the local buy-here, pay-here dealers, Johnson said.
So the pair purchased an old tractor dealership and converted it into a used-car lot.
Johnson said the site was perfect, located along the main traffic artery in Laurel. The
cars range in price from $3,500 to $4,500.
Shortly after opening their first successful store in Laurel, they bought another
dealership in nearby Seaford, Del., moved it to a nearby location and re-named it The Car
Store.
A third dealership is under development in Salisbury, Md. This lot will retail vehicles in
the $8,000-$9,000 range. All three stores will share the same name.
Laurel, Seaford and Sailisbury, Md., are all located in relatively rural areas along
Marylands and Delawares eastern shore, Johnson said.
Johnson advertises in specific local newspapers, but also advertises on radio and
television now and then.
We also have a billboard, Johnson said. That gives us visibility. We
also try to promote the dealerships at our other companies  the finance company and
the insurance business.
Most of their customers are local light-factory workers and state employees.
Johnson spent a lot of time learning the business. He visited the Indianapolis-based
used-car chain J.D. Byrider Systems. He has also taken the counsel of industry experts
Chris Leedom, of Leedom and Associates of Sarasota, Fla. and Kenneth Shilson, a
Houston-based CPA, and founder of the National Association of Buy-Here, Pay-Here Dealers.
Johnson gets his cars from several sources, including wholesalers and nearby auctions. The
two lots currently retail about 70 vehicles a month. He expects sales to climb to more
than 100 units a month once the Salisbury store is open.
Like every buy-here, pay-here dealer, Johnson has to cope with customers defaulting on
loans. Johnson said a lot of effort has been expended to bring the current default rate to
under 2 percent a month. The default rate on all outstanding loans is between 18 and 20
percent.
In January we went to 100 percent starter-interruption systems by Payteck (of Cleveland) in all of our units, Johnson said.
Its made a difference. Im a believer. We havent had any problems
to date and it hasnt slowed sales that I can tell.
Johnson has four mechanics on staff to try to sell cars that will be running in 30
months. He also has a car-rental business with a fleet of 75 cars.
So far, Johnson said, the car business has been successful  but not without
problems.
Learning the car side of the business has been a real eye-opener, Johnson
said.
I knew I had a lot to learn. That was a given. But I didnt plan on selling 70
cars a month. The pro formas I set up were based on figures closer to 25 or 30 cars a
month.
By selling more than twice the number of cars a month than originally planned, Johnson and
staff have had to scramble to find the kinds of cars that fit his inventory profile 
at a competitive price.
As our sales volume increases, it has become harder to get good cars, he said.
We try to make our cars right before we sell them.
Coming up with cars that will last our customer 30 months in the right price range
has become our biggest challenge.
Johnson also admits to being somewhat overwhelmed by the auto-auction process.
Its been educational going to the auctions, Johnson said.
Ive learned its very important to understand what a vehicle should go
for at an auction. I would not describe the experience as fun, but thats where the
cars are.
Because hes been in the business for such a short period, he doesnt presume to
think that hes got it made.
Im still learning, Johnson said. Were trying new things,
like having 14 different places where customers can make car payments. So far, so
good.

Payment Devices Boost Profits, Good Will

USED CAR NEWS 3/4/2002:

By Jenny King

Philadelphia-area independent John DeFilippo waited until legal issues
regarding payment security systems had made their way through the courts in Michigan.
When the electronic device that keeps a vehicle from starting if the owner has missed a
payment passed judicial scrutiny, DeFilippo adopted the technology for his buy-here,
pay-here vehicles.
Payment security systems have surprised dealers and customers alike, and appear to be
growing in popularity. Dealers say they dramatically reduce delinquent payments and all
but wipe out repos. More assured they will be paid, dealers can reduce down payments and
interest rates, and offer higher quality vehicles.
Customers say they appreciate knowing exactly when each payment is due. Some systems allow
payment extensions. And their shut-down capabilities serve as a theft deterrent which can
translate into lower insurance rates for buyers.
My delinquency total is under 20 percent, said DeFilippo, dealer at DeFilippo
Brothers Motor Cars in Prospect Park, Pa. Customers are not turned off by it. Some
have even thanked me.
DeFilippo started using Passtec devices in the summer of 2000. He said he was one of the
first to upgrade to the Denver, Colo. companys Passtime system. One of its
advantages is that the consumer need not come in to the dealership to make a car payment.
While their features vary, payment security systems have this in common: they prevent a
driver from starting a vehicle when a payment is delinquent. They all provide plenty of
notice that money is due and they will not turn a vehicle off that is already up and
running. Some double as theft-deterrents.
Payment security systems tend to be programmed to alert the buyer on a regular basis. Once
payment is completed, the device is re-set by punching in a code, swiping a special card
or somehow preparing the system to go off again in one week, two weeks, a month, or
whenever regular payments are expected at the dealership.
The system is typically installed at the dealership. Some companies offer on-site training
in installation and in crediting payments and re-setting devices with codes or other
enablers.
Ashley Herndon tells new- and used-car dealers that the OnTime system distinguishes itself
in several ways. One of them is documentation for the dealer.
Our written reports are constantly revised and can tell the dealer where customers
are with payments and even who on the staff has received payments from buyers, said
Herndon from company headquarters in Temecula, Calif.
A unique six-digit code is generated with each payment and allows the customer to continue
driving into the next period, he said.
Trained individuals at a dealership provide that code when they log in a payment. The
buyer enters each new code on a keypad that feeds it into the onboard system.
The OnTime software and applications are patented, Herndon said. Distributors handle
products and work individually with dealer customers.Payteck, from Pay Technologies,
LLC, in Cleveland, Ohio, ships its product directly to dealers. The vehicle-installed
device will tell the customer how many days remain before the next payment is due.
We beep the customer two days before the next payment, said spokesman Jim
Krueger. We have a feature called 911 which will give the consumer an extra 24 hours
in case of an emergency. This is available every payment period.
The customer gets a new code number each time a payment is logged. If payment was done by
mail, the buyer can call the dealer for the new code, he said.
Dealers say very few customers turn away from a deal because there is a payment
protection device on a car, he said. These individuals know they have damaged
credit. We refer to this as a security system. Reaction is more positive than youd
think.
Devin Spearman, owner of Spearman Motors in Findlay, Ohio, said he initially struggled
with remembering to record customer codes, but once he and his staff ironed out the
wrinkles he has been pleased with the Payteck system.
I like the fact that the customer doesnt have to come in to get a (new) code
 the customer can mail in a payment or even use a nearby 24-hour payment center and
get a code from us by telephone, he said. Our delinquent payments are down
from 40-50 percent to about 10 percent.
Spearman has been using Payteck for about a year. He has his
devices set for two-week intervals, even though many customers make weekly payments. It
makes re-coding easier, he said.
Tom Keller refers to his company, American Access, Inc., as the new kid on the
block.
We believe the Payment Sentry Systems, with pager messaging functions, employ better
technology, he said.
Ours is the only on-command system. It is not a timer system, it is not
customer-intrusive, and the customer is not embarrassed each time he or she comes in to
make a payment.
Keller said the dealer or financial institution controls delinquency by phoning a
toll-free number. Following prompts, the dealer can set off a red-light-and-beeper warning
in the customers vehicle; can interrupt the starter of a parked vehicle, and can
utilize an alarm feature that flashes the headlights and sounds the horn of the vehicle in
question.
The customer responds by phoning the dealer. That usually happens within 10 minutes of the
audio-visual warning, Keller said.
Eva Achtemeier, a spokeswoman for Colorado Springs finance company KMR, said customers do
seem to respond to the Payment Security System warning.
We often keep it on for 24 hours to give the buyer a chance to call about a late
payment, Achtemeier said. Most of the time well turn the beeping off or
re-enable the vehicle after a call.
The finance company had used a system that required inputting codes and found vehicles
would continue running whether or not codes were entered.
Ray Lyle Sr., who with his son Ray Jr. oversees seven Nice Cars dealerships in Tennessee
and Georgia, said he was scared by payment security systems.
Lyle figured the best way to find out how they really work was to install them on his own
car.
Ive used every system on the market, he said.
Lyle said he no longer would sell a vehicle without a system. There are starter
interrupters  Passtime  on virtually all of the 750 vehicles in his inventory.
Lyle said it takes about five minutes for a computer-literate staff member to learn the
system he uses. The dealerships radio repair specialists handle installations
on-site.

PayTeck Adds Directly to Bottom LineUSED CAR NEWS 8/21/2000:

PayTeck
automatic payment controls for buy-here, pay-here dealers are easy-to-use,
customer-friendly and deliver bottom-line results.
The new PayTeck controls offer
the dealer the ability to program the cars in a matter of seconds. No waiting for the
mechanic to install a unit for a waiting customer.
The PayTeck controls can be
preinstalled on the vehicles on the lot. When a sale is made the dealer takes the
exclusive PayTeck LCD-LINK and plugs into the preinstalled
controller in the car an programs in the terms.

To program terms only takes a
matter of seconds. This is very efficient for the dealer to get the customer on their way.
No waiting or delays. You can also make a safe when the service tech is not around.
With the PayTeck customer
literature, all the benefits and features are explained for the customer. The
factory-supplied literature tells the customer how "secure their credit" and how
to "secure their investment" with the PayTeck
System 2000 featuring Security Plus for the consumers.

In addition the PayTeck System 2000 tells the customer how many days till payment
is due. In case of an emergency, a one-time per-payment emergency code is available.
When the customers are faced with walking of driving, the
dealer payment for the vehicle takes priority. This results in reduced past due accounts,
and has a major impact on the balance sheet and cash flow.PayTeck is solid-state
technology that prove it is worth on the bottom line. It's Web address is www.payteck.cc